Paul Krugman: Japan Was Never In As Dire Straits As Europe Is Right Now

In an interview with Bloomberg's Tom Keene, economist and New York Times columnist Paul Krugman said getting the economy back to full employment is "the most urgent priority we have right now." On Wall Street, Krugman told Keene, "I think there's not enough skepticism. Our financial sector has gotten way bigger and more concentrated. It has grown from 4% to 8% of GDP and it is not at all clear what society is gaining from that. I think if anything, the general public is too willing to take Wall Street at face value as actually performing a useful service."

Krugman also took shots at Europeans who claim they are "not Japan" and said "their notion that they are somehow doing better than Japan, they are doing worse than Japan ever did."
video and transcript below

Highlights

Krugman on dangerous slack in Economy:

Paul Krugman

"If people are unemployed for long enough, they may never get back into the workforce. If investment is depressed long enough, we never build the capacity. So if you think there is a lot of slack or even if you think that there might be a lot of slack in the US economy, then that should be a tremendous preoccupation. We've got to get rid of that. We need to get this economy back to something like full employment. It becomes the most urgent priority we have right now."

Krugman on Japan vs. Europe:

"I have to say, when the Europeans say we're not Japan, I agree. Japan was never in as dire straits as Europe is right now. They never had the mass unemployment. There was never a part of Japan that looked like Spain or Greece does in Europe right now. So their notion that they are somehow doing better than Japan, they are doing worse than Japan ever did."

Krugman on current economic conditions:

"We should be vastly impatient. This has gone on. If you had said in 2007, that more than 6 years after a recession begins, we would still be talking about an economy with high unemployment, sluggish job growth, there hasn't been a single month, that I can remember, where we've created as many jobs as we did during an average year during the Clinton administration. This is crazy. The idea that this should be regarded as an acceptable pace of progress is just really, really wrong."

Krugman on inequality:

"There's zero evidence that the kind of extreme inequality that we have is good for economic growth. In fact, there's a lot of evidence that it is actually bad for economic growth. Nobody wants us to become Cuba. The question is, do we have to have levels of inequality that are getting close to being the highest levels ever anywhere. We're really starting to set new records here. Is that a good thing for anybody? If you look at our own history, it's not true. The fact of the matter is since inequality began soaring around 1980, the bottom half of America has been pretty much left behind. It has not been a rising tide that raised all boats."

Krugman on how income inequality gets solved:

"American history is actually very encouraging because in America, we often had leadership, we had often people from the affluent classes themselves who said this is too much. If we could have modern politicians speaking as forthrightly about the danger of high concentration of wealth as Teddy Roosevelt did in 1910, we would be a long way towards having a good solution to this. I guess I believe that America has a tremendous redemptive capacity, an ability to take a look and say, in the end, what our ideals, what do we want society to look like, an ability to step back. We don't have to become this oligarchy that unfortunately we are drifting towards."

Krugman on whether we are living in a gilded age:

"It's more than that. We're at gilded age level of inequality and beyond. It's a belle epoque as Pikkety says. It's an era not just of great inequality but increasingly of inherited inequality and I think if people understand that they'll say nope, we don't want that to happen and we can do things that are not Draconian, that are not socialist in the American tradition to limit that rise in inequality."

Krugman on Obamacare and Obama:

"At this point, Obamacare looks like it is a success. It's not the program anyone would have designed from scratch but it is a huge improvement for American lives and just having that legacy plus the somewhat weaker but still important legacy of financial reform, Obama is one of our most consequential presidents. You have FDR, LBJ, Ronald Reagan and Barack Obama as presidents who left America quite a different place once they were done."

Krugman on the basic problem with the US Economy:

"The basic problem with the US economy is that there are not enough jobs. And then, given that, employers get to be picky. Who would they want to offer a job? Preferably somebody who already has one or who lost a job only recently so the